As a company director how effective is your board at strategic risk governance?

Along with setting direction and monitoring performance, the governance of risk is a fundamental responsibility of Directors and Boards. As Harry Yarger of the US Army War College has written,

“Acceptance of risk is the ultimate leadership decision.”

In recent years, this fiduciary duty has become much more important: In a world of greatly increased complexity and uncertainty, skill in avoiding failure is critical to achieving success and delivering substantial returns. Yet in executing their duty to govern risk, Directors and Boards face some deeply unsettling issues today. As Peter Whitehead wrote in the Financial Times,

“the root cause of most company failure lies in the boardroom, with a serious skills gap and risk blindness being the most common factors.”(“Company Disasters: Boards are to Blame” FT, 5 June 13).

A June 2013 report by Cass Business School on over 40 company failures concluded that these firms,

“had underlying weaknesses that made them especially prone both to crises and to the escalation of a crisis into a disaster. These weaknesses … potentially inherent in all organisations … can pose an existential threat to any firm, however substantial, that fails to recognise and manage them. These risk areas are beyond the scope of insurance and mainly beyond the reach of traditional risk analysis and management techniques as they have evolved so far.” This challenge is further compounded by an impeded flow of risk-relevant information to many boards and directors. As the Cass report noted, “there appears to be a risk ‘glass ceiling’, with often an inability or unwillingness of risk management and internal audit to report on risks to … non-executive directors, particularly risks arising from strategy, behaviour and culture (as opposed to operations)”.

Finally, as the UK Government Actuaries Department observed in January 2013,

“there is very little academic work or methodology around the real thing that matters for Boards. The challenge is strategic risk. How do you manage and handle strategic risk — the thing that really matters.”

The key processes that your board could adopt to improve its risk governance skills

How to improve your organisation’s strategic risk mitigation

Course Leaders:

Neil Britten CDir FIoD

Neil Britten is a UK Institute of Directors, qualified Chartered Director, non-executive chairman and director with over a decade’s board level experience of strategy, risk governance and strategic performance monitoring.

Prior to roles as a professional director he was Vice President for a major international consulting firm focused on strategy and strategic change and an executive with a major oil and chemicals conglomerate. His experience spans work, in the UK, France, Australia and over 20 other countries, as an executive in and advisor to mostly large, multinational corporations in technology, oil & gas, consumer goods, manufacturing and financial services sectors. He has also acted as an advisor to private equity investors in start-ups and SMEs. private and public sectors.See his LinkedIn profile here:

Tom Coyne

Tom Coyne has served as the Chief Executive Officer, Chief Financial Officer, Chief Risk officer and Director of public and private companies and not-for-profit organizations in the United States and Canada.

He began his career at Chase Manhattan Bank in South America, and later joined the London office of a major global consulting firm, where he led its Corporate Growth Center of Excellence. For the past three years, Tom has been a member of the leading team in the United States Intelligence Advanced Research Projects Agency’s forecasting tournament. He has also written for a number of investment research publications on the subjects of risk management and asset allocation. His papers on strategic risk governance and strategy evaluation are top downloads from the Social Science Research Network. See his LinkedIn profile here: